Freedom fires cleanup contractor; judge sets claims deadline

Freedom Industries has terminated the contractor in charge of the cleanup of its Elk River chemical tank farm, just days after two incidents in which stormwater overflowed a collection ditch at the high-profile site, sending potentially contaminated runoff pouring into the river.

Mark Welch, Freedom’s chief restructuring officer, confirmed that he told officials from the firm Civil & Environmental Consultants Tuesday he had decided to replace them after a meeting in which state Department of Environmental Protection Secretary Randy Huffman pushed for the step as part of a response to last week’s spills.

“I talked with DEP and they decided it was time to move on,” Welch said in an interview Tuesday evening.

Word of Freedom’s action comes on the same day that a bankruptcy judge proclaimed that Freedom and DEP “appear to be working conscientiously and diligently” toward the remediation of the site of the January chemical leak that contaminated drinking water for 300,000 people across the region.

U.S. Bankruptcy Judge Ronald Pearson made those remarks in an order in which he set an Aug. 1 deadline for the filing of financial claims against Freedom in the company’s ongoing bankruptcy case.

The deadline applies to all creditors including individuals and businesses that have claims caused by the Elk River spill. Any party who does not file a claim by Aug. 1 will be excluded from filing a claim against Freedom Industries or its property, the judge said.

In a three-page order, Pearson acknowledged that Freedom still faces “substantial environmental clean-up tasks.” But, Pearson said, “with appropriate caution and skillful work to dismantle and remediate” the site, there should be money left both for creditors and “some action to benefit persons and entities who have had losses” resulting from the spill.

The judge said there appears to be “numerous individuals with lost wage claims, out-of-pocket expenses for medical treatment, business claimants who have sustained losses” and other claims that have yet to be asserted in the bankruptcy proceeding. Pearson said that because Freedom is liquidating, there will be only “pro rata” distributions, in which funds are doled out proportionally to creditors.

“It is important that the claim filing process commence so that there can be a determination of the losses Elk River Claimants have sustained and their rights to participate in the case are protected,” the judge wrote.

Pearson said that “there are still unknowns with respect to the total resources that may be available for all creditors, including unsecured and Elk River Spill Claimants in this case.” Much will depend, the judge said, on the ability of Welch “to find safe and economical ways to dispose of materials that remain at the Etowah terminal and permit cost-effective demolition of the facilities there to allow full and complete site remediation.

“Environmental claims and the actions necessary to protect public safety have the highest priority in the case,” the judge said. “Public understanding and support of the responsible actions necessary by those working on the cleanup and dismantling of the Etowah facility will potentially increase the funds remaining for cleanup and addressing claims.”

The judge went on to say that Welch and the DEP “as well as the remaining employees of [Freedom] appear to be working conscientiously and diligently to implement a cost effective and safe means for demolition and cleanup.”

Last week, a stormwater collection trench at the Freedom site overflowed twice in as many days, allowing potentially contaminated runoff to pour into the Elk River, just 1.5 miles upstream from the West Virginia American Water drinking water intake for the region.

DEP officials issued notices of violation for both incidents, alleging Freedom did not take adequate steps to control runoff, and Welch filed reports with the bankruptcy court detailing what had occurred. Freedom and DEP are continuing to work on the company’s proposed improvements to its runoff control plans.

Water samples taken after the spills turned up no MCHM, the main chemical involved in January’s leak, but DEP officials said that the incidents raised issues about how well the cleanup was being managed.

Huffman said that when he met with Welch on Tuesday he made it clear that he wanted Freedom to find another firm to take charge of the cleanup as the project moves toward the scheduled June 25 demolition of most of the chemical storage tanks.

“I called for their termination,” Huffman said. Testing that will follow the tank demolition will give officials a better idea of what sort of contamination exists at the site and guide the planning for the long-term cleanup.

Huffman said he was concerned both about actual problems with work at the site and with the public perception that the job wasn’t being handled properly. “I have lost confidence and the public has lost confidence and we’re getting ready to head into the most critical phase of the remediation,” Huffman said.

The incidents last week were the latest in a string of problems related to Freedom or its cleanup contractors. But in bankruptcy court, some claimants have already been arguing that the contractors are spending too much time at the site and billing Freedom too much money that could otherwise be distributed among creditors.

So far, it’s unclear what the projected costs of the site cleanup will be or if there’s enough money to do the job right. Pearson has allowed Freedom to file certain key budget documents under seal from the public.

Welch said that Civil & Environmental Consultants would be “phasing out” of the project, and that his search and hiring of a new consulting firm would not delay any work on the tank demolition or site remediation.

In a separate order Tuesday, Pearson also turned down Freedom’s request that it be able to hire the bankruptcy consulting firm Rust Omni to handle the notice concerning bankruptcy claims and to act as claims agent in the case.

Pearson said Freedom’s proposal to hire an “out-of-area claims agent ... who is not familiar with the area of impact entities raises many questions as to cost and efficiency.”

Instead, Pearson appointed James W. Lane Jr., a lawyer at the Charleston firm of Flaherty Sensabaugh Bonasso PLLC to act as the claims agent, to prepare and publish public notices of the deadline to file claims and to offer some limited assistance to claimants to help them meet the filing deadline.

In a news release, Lane said that individuals who want to file claims can use the bankruptcy court’s website, www.wvsb.uscourts.gov. Anyone with questions about the process can email claimagent@elkriverwvspill.com or call 866-245-0312, Lane said.